Marsh Supermarkets, Inc. Third Quarter Results of Operations24 February 2006
Marsh Supermarkets, Inc. (Nasdaq:MARSA) (Nasdaq:MARSB) today reported its financial results for the third fiscal quarter ended January 7, 2006. The Company previously announced that the quarter's results would include a non-cash impairment charge of $12.8 million before tax ($8.4 million after tax) and that it has implemented store closings and other initiatives that are expected to save more than $15.0 million annually.
Total revenues for the quarter increased to $407.5 million, an increase of $3.9 million or 1.0% over the prior year quarter. Total sales in comparable supermarkets and convenience stores were 0.7% above last year. Comparable stores are those that were open during both quarters. Comparable store merchandise sales, which excludes gasoline sales, declined 1.4% compared to the same period in 2005. The Company excludes gasoline sales from its analysis of comparable store merchandise sales because retail gasoline prices fluctuate widely and frequently, making analytical comparisons difficult (see included schedule reconciling comparable store sales and comparable store merchandise sales).
The Company reported a net loss of ($9.6) million, compared to net income of $2.7 million for the same period last year. The quarterly loss includes the previously announced $8.4 million after tax charge for impairment of long-lived assets. This non-cash charge will bring the book value of these assets in line with their estimated fair market value.
The third quarter results of operations also included $1.9 million before tax ($1.2 million after tax) of costs related to the previously announced exploration of strategic alternatives and debt refinancing as well as severance costs. Further, gains from real estate sales declined $1.7 million ($1.1 million after tax) from the prior year quarter.
"We made some difficult decisions that affected this quarter's bottom line, but which also will enhance our ability to improve future earnings," said Don E. Marsh, Chairman and CEO. He said that the Company's management is committed to taking actions to improve the Company's financial position.
Store Closings and Cost Savings
The Company announced on February 8, 2006, its decision to close nine stores by the end of the month as part of its ongoing efforts to improve the cash flow of the Company. The Company has already closed six Village Pantry convenience stores (four in Indianapolis and two in Anderson) and the Trios Di Tuscanos restaurant in Noblesville. The Marsh Supermarket in Fort Wayne and the Savin*$ store in Muncie will be closed by the end of the month. Upon closing of the stores, the Company expects to record an additional charge of $6.0 to $10.0 million ($3.9 to $6.5 million after tax) in the fourth fiscal quarter, primarily related to future lease payments.
As previously announced, the planned cost saving measures included a reduction of staffing, travel and corporate overhead at the company's headquarters. The Company expects to incur a fourth quarter charge of $5.8 to $6.8 million for future cash expenditures related to the reduction of staffing at the Company's headquarters. Additionally, the previously announced termination of the supplemental executive retirement plans is expected to reduce expenses by $3.0 to $4.0 million annually.
Collectively, these actions are expected to save the Company more than $15.0 million annually.
Other
As part of the Company's recent financings and previously announced decision to explore strategic alternatives, the Company had substantially all of its owned real estate appraised. The Company owns the real estate and buildings for 34 of its supermarkets, 44 of its convenience stores, and five of its other florist and catering facilities. In addition, the Company owns its corporate headquarters, certain warehouses and other land and buildings. Based on the recent appraisals, management of the Company believes that the estimated fair market value of the Company's owned real estate and buildings exceeds the net book value of such real estate and buildings reflected on the Company's consolidated financial statements by $100.0 to $150.0 million. However, appraisals are inherently subjective and represent the opinion of the appraisal firm based on the information available to it. Appraisals are merely estimates of value and are based upon numerous assumptions and are subject to numerous qualifications. The Company therefore cannot assure that such appraisals are an accurate measure of the true worth of the properties. Further, the appraisals do not necessarily reflect the actual amount that a buyer would pay for the properties and should not be relied upon as an accurate measure of realizable value of the properties. Additionally, since appraisals are conducted as of a given point in time, subsequent events could cause the appraisal value of a property to vary significantly from the stated amount. Some of these properties have been pledged as collateral to secure indebtedness under the Company's credit facility and term loan.
About Marsh Supermarkets, Inc.
Marsh is a leading regional chain with stores primarily in Indiana and western Ohio, operating 69 Marsh(r) supermarkets, 38 LoBill(r) Food stores, 8 O'Malias(r) Food Markets, 154 Village Pantry(r) convenience stores, 2 Arthur's Fresh Market(r) stores. The Company also operates Crystal Catering Food Services(sm) which provides upscale catering, cafeteria management, office coffee, coffee roasting, vending and concessions, and Primo Banquet Catering and Conference Centers; Floral Fashions(r), McNamara(r) Florist and Enflora(r) -- Flowers for Business.
Cautionary Note Regarding Forward-Looking Statements
This report includes certain forward-looking statements (statements other than those made solely with respect to historical fact). Actual results could differ materially and adversely from those contemplated by the forward-looking statement due to known and unknown risks and uncertainties, many of which are beyond the Company's control. The forward-looking statements and the Company's future results, liquidity and capital resources are subject to risks and uncertainties including, but not limited to, the following: uncertainties regarding the effect or outcome of the Company's decision to explore strategic alternatives; the entry of new or remodeled competitive stores into the Company's market areas; the level of discounting and promotional spending by competitors; the Company's ability to improve comparable store sales; the level of margins achievable in the Company's operating divisions; the stability and timing of distribution incentives from suppliers; changes in the terms on which suppliers require the Company to pay for store merchandise; the Company's ability to control expenses including employee medical costs, labor, credit card fees, and workers compensation and general liability expense; uncertainties regarding gasoline prices and margins; the success of the Company's new and remodeled stores; uncertainties regarding the cost savings of store closings and other restructuring efforts; uncertainties regarding future real estate gains due to limited real estate holdings available for sale; potential interest rate increases on variable rate debt, as well as terms, costs and the availability of capital; the Company's ability to collect outstanding notes and accounts receivable; uncertainties related to state and federal taxation and tobacco and environmental legislation; uncertainties related to the outcome of pending litigation; the timely and on budget completion of store construction, conversion and remodeling; and other known and unknown risks and uncertainties. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands)
(Unaudited)
Jan. 7, Jan. 1,
2006 2005
---- ----
Assets
Current assets:
Cash and equivalents $ 28,813 $ 47,302
Accounts receivable, net 26,465 24,505
Inventories 135,222 133,731
Prepaid expenses 5,792 6,367
Prepaid income taxes 1,985 1,364
-------- --------
Total current assets 198,277 213,269
Property and equipment, less
allowances for depreciation 306,852 304,272
Other assets 44,861 62,807
-------- --------
Total Assets $549,990 $580,348
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 73,150 $ 83,460
Accrued liabilities 66,220 52,487
Current maturities of long-term
liabilities 4,149 5,361
-------- --------
Total current liabilities 143,519 141,308
Long-term liabilities:
Long-term debt 191,490 198,941
Capital lease and financing
obligations 42,889 27,494
Pension and post-retirement
benefits 32,962 46,356
-------- --------
Total long-term liabilities 267,341 272,791
Deferred items:
Income taxes 8,133 15,830
Gains from sale/leasebacks 15,480 16,846
Other 3,976 3,359
-------- --------
Total deferred items 27,589 36,035
Shareholders' Equity:
Common stock, Classes A and B 26,661 26,615
Retained earnings 116,448 133,328
Cost of common stock in treasury (15,916) (15,690)
Deferred cost restricted stock (31) (153)
Notes receivable stock purchase (11) (11)
Accumulated other comprehensive loss (15,610) (13,875)
-------- --------
Total shareholders' equity 111,541 130,214
-------- --------
Total Liabilities and
Shareholders' Equity $549,990 $580,348
======== =======
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(In thousands, except per share amounts)
(Unaudited)
12 Weeks Ended 40 Weeks Ended
---------------------- ----------------------
Jan. 7, Jan. 1, Jan. 7, Jan. 1,
2006 2005 2006 2005
---- ---- ---- ----
Sales and other
revenues $ 407,292 $ 401,752 $1,366,175 $1,325,222
Gains from sales of
property 217 1,890 749 3,164
---------- ---------- ---------- ----------
Total revenues 407,509 403,642 1,366,924 1,328,386
Cost of merchandise
sold, including
warehousing and
transportation,
excluding
depreciation 287,313 284,035 964,867 935,358
---------- ---------- ---------- ----------
Gross profit 120,196 119,607 402,057 393,028
Selling, general
and administrative 109,666 105,099 370,990 351,134
Depreciation 6,278 5,815 20,401 19,387
Impairment of
long-lived assets 12,775 -- 12,775 --
---------- ---------- ---------- ----------
Operating income
(loss) (8,523) 8,693 (2,109) 22,507
Interest 5,222 4,475 15,923 14,462
Other non-operating
expense (income) 33 -- (350) (838)
---------- ---------- ---------- ----------
Income (loss)
before income taxes (13,778) 4,218 (17,682) 8,883
Income taxes
(benefit) (4,146) 1,545 (5,308) 3,288
---------- ---------- ---------- ----------
Net income (loss) $ (9,632) $ 2,673 $ (12,374) $ 5,595
========== ========== ========== ==========
Earnings (loss) per
common share:
Basic $(1.22) $.34 $(1.57) $.71
Diluted $(1.22) $.34 $(1.57) $.70
Dividends declared
per share $ -- $.13 $.26 $.39
==== ==== ==== ====
MARSH SUPERMARKETS, INC.
RECONCILIATION OF SALES AND OTHER COMPARABLE REVENUES ($000)
------------------------------------------------------------
Jan. 7, Jan. 1,
2006 2005
---------- ----------
Year to Date
Total revenues $1,366,924 $1,328,386
Less: other revenues,
non-comparable sales and
gains from sales of property (a) 102,792 90,127
---------- ----------
Comparable supermarket and
convenience store sales 1,264,132 1,238,259
Less: comparable gasoline sales 151,762 120,212
---------- ----------
Comparable supermarket and
convenience store
merchandise sales (b) $1,112,370 $1,118,047
========== ==========
3rd Quarter
Total revenues $407,509 $403,642
Less: other revenues,
non-comparable sales and
gains from sales of property (a) 29,656 28,212
---------- ----------
Comparable supermarket and
convenience store sales 377,853 375,430
Less: comparable gasoline sales 42,241 35,182
---------- ----------
Comparable supermarket and
convenience store
merchandise sales (b) $335,612 $340,248
========== ==========
(a) Other revenues and non-comparable sales include sales and
revenues of both Crystal Foodservice and McNamara, as well as
supermarket and convenience store revenues from video rental,
lottery tickets, check cashing fees and other sources.
(b) The Company excludes gasoline sales from its analysis of
comparable store sales because retail gasoline prices fluctuate
widely and frequently, making analytical comparisons difficult.
Comparable stores include stores open at least one full year,
replacement stores and format conversions.
CONTACT: Myra Borshoff Cook
Borshoff Johnson Matthews
317-710-2127
Source: primezone
All trademarks and copyrighted information contained herein are the property of their respective owners.
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